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Tuesday, July 22, 2008

The bill starts rolling in

So according to Stuff $80.2 million for the newly nationalised railway, most of which is to replace the long distance passenger rail rolling stock. Now the $25.54 million for the Tranz Alpine is slightly odd, since it is actually quite a profitable service. I'm convinced if the damned thing had been sold this would happen anyway. The Tranz Coastal is profitable, but marginally so, and the Overlander is in the same category. So you might ask - why should $27.5 million be spent on a couple of passenger trains instead of raising fares so that the owner can borrow against future fare revenue? After all it is how bus companies and airlines work.

However, nooo Dr Cullen evades the truth about why this is "necessary". "The selling off our rail system in the 1990s was followed by asset-stripping and a failure to properly invest in the services" he said.

Well hold on. What investment was there BEFORE the 1990s? Well you only have to look at the age of the current rolling stock. The carriages currently used on all these services were built between 1937 and 1945. Their economic lives were coming to an end in the 1970s when it was state owned, and nothing was done except patching them up, much like the 1980s as well. I remember the services that are now the TranzCoastal and the TranzAlpine when they received oodles of state subsidies every year - and the rolling stock was not air conditioned, had no on board catering (trains stopped halfway at a station for people to rush out for the stereotypical pie and a cuppa), virtually no marketing, no on board service of any kind (unless you count asking the guard questions the odd time he walked around). The toilets dropped waste onto the tracks and were never serviced during the trip.

THAT was the state owned subsidised long distance passenger rail service on those routes. What changed this was Richard Prebble announcing, in response to pleas from the Railways for money to buy new trains, that there would be one final year of subsidies, bulk funded so the Railways could make the services profitable. Suddenly things happened, the station cafeterias on these routes were shut down in favour of on board catering, the trains were refurbished with new seats and suddenly marketing emerged. The Railways actually cared about attracting users, not attracting subsidies. The Christchurch-Greymouth express stopped being two trains leaving each town at the same time, passing halfway and finishing their trips in the early afternoon, and amazingly became one train in the morning one way, and returning in the afternoon, making it a plausible day trip for tourists. That train also got big wide panoramic windows, then air conditioning. It started making money.

Ah, you say, that was still under government ownership. Yes it was, government ownership to wean it off subsidies. So what happened after that? Well progressively over the following years, other services were refurbished, this continued after the Railways Corporation became NZ Rail Ltd (as an SOE under the SOE Act), and under privatisation as TranzRail through to 1994.

Oh so after privatisation it was run down? Well. Dr Cullen has announced taxpayers' money is to be used to refurbish a series of secondhand ex.British railway carriages to use on current services. What he hasn't said is that those carriages were purchased by the privatised Tranz Rail in 1996 for this very purpose, and to upgrade the Capital Connection service (which was done, without any taxpayer funding). 69 were bought, but the cost of refurbishment proved prohibitive at the time, as car ownership costs and airfares fell, and TranzRail was more focused on freight and monitoring the profitability of the long distance passenger rail services. Of course subsequently several services were cancelled due to lack of patronage (Southerner, Northerner, Bay Express, etc).

So the myth about how the private sector didn't invest in rail is largely false, as is the implied myth that the public sector did. The truth is that there hasn't been a brand new long distance passenger train put into service in New Zealand since 1972 - you'll see them swanning around Auckland now in their twilight years - the 3 bespoke Silverfern railcars. There is a reason for that - most of you have chosen to fly or put your money into owning a car, and the rest aren't in enough numbers to justify any more than bus loads, except for a couple of tourist routes.

Oh and you might ask why taxpayers have to pay for an upgrade of Picton Ferry Terminal, when the Interislander in all its guises has been clearly profitable for 44 out of its 46 years of history.

2 comments:

john-ston
said...

The thing that Cullen has exploited is the lack of knowledge by the public over the two different eras of privatisation. All the positive elements occurred during the Ed Burkhardt era (1993-1999), when there was massive expansion and the railways of New Zealand was transformed into a very good entity. The important thing was that Ed Burkhardt wasn't heavily profit driven; it meant that services that weren't cash cows carried on, and you saw many innovations. When he was backstabbed, and replaced by Fay Richwhite (2000-2003), things changed completely. They were heavily profit driven and drove the railways into the ground. Of course, Cullen always emphasises the Fay Richwhite era and conveniently forgets the Burkhardt era.

Of course, Toll would have been similar to Burkhardt, however, they paid too much for Patrick and needed to spend money that had been earmarked for New Zealand to allow a smooth merger - they had even been doing major fix ups on shunting locomotives before the Patrick takeover.

The 69 carriages that you mention have all been used. This was their final allocation

Also, what does shock me is that $53 million is to be spent. About the same amount is being spent on 36 SA/SD carriages, and they involve a significant amount of re-engineering work. An order of 30 S carriages (16 South Island, 8 North Island, 6 spares) should only cost $30 - $35 million, as the re-engineering work would not be required. Of course, the cost would drop if you use the existing narrow gauge bogies from the A carriages. What on earth is the extra $15 million going for? Wastage?

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About Me

Life, liberty and the pursuit of happiness. Politics, philosophy and economics from a pro-capitalist, libertarian, objectivist perspective. Born in New Zealand, live in the UK, career has been in transport, telecommunications and infrastructure policy.